Game Group hit as some suppliers refuse to do business

Struggling video games retailer Game Group has confirmed that a number of its suppliers are now refusing to do business with the company, sending its shares down 63% to 1.29p.

Game said that while it was trying to resolve the matter "as quickly as possible", it was unsure if its efforts would be successful.

Some analysts say Game may fail to pay a quarterly rent bill later this month.

This increases the possibility of the company going into administration.

Earlier this month, Game secured a fresh lending deal with its banks, but this has failed to impress its suppliers.

Game said in a statement on Monday: "It is uncertain whether any of the solutions currently being explored by the board will be successful, or will result in any value being attributed to the shares of the company."

One company that is refusing to supply Game is Electronic Arts. This has meant that Game has not been able to stock some of the biggest-selling games, including Mass Effect 3.

Game's chief executive Ian Shepherd later tweeted: "Very tough time for all our teams around the world. We fight on, though.

"Plenty still to do, customer support humbling as always."

Poor Christmas

Game has seen its business eroded by competition from online-only retailers, such as Steam and Amazon.

We suspect that any potential suitor would prefer to wait for a formal administration processMark Photiades, Analyst, Singer Capital Markets

The company, with headquarters in Basingstoke, has 1,300 stores worldwide, including 600 in the UK, trading under the Game and Gamestation brands.

Both Game and Gamestation also have an online presence, as does the firm's third internet-only brand, Gameplay.

Its group-wide sales for the key Christmas period fell sharply, dropping 12.9% from a year earlier on a like-for-like basis.

It is now predicting an underlying pre-tax loss of about £18m for the year to the end of January.

Game traces itself back to 1992, when a company called Rhino Group was established.

In 1995 its stores were rebranded as Electronics Boutique. Three years later, 86 Game stores were acquired for £99m.

The company was renamed Game Group in 2002, and all store rebranded to the Game name.

Game Group then purchased Gamestation in 2007.

Analysts say Game is now looking for a suitor, with US rival Gamestop being named as the leading candidate.

However, analyst Mark Photiades of Singer Capital Markets said no buyer was expected to come forward before any move by Game into administration.

"We suspect that any potential suitor would prefer to wait for a formal administration process," he said.

"Through a pre-pack, the suitor would have much greater flexibility around store liabilities."